Correlation Between NSK and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both NSK and Sumitomo Chemical at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NSK and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NSK Ltd ADR and Sumitomo Chemical Co, you can compare the effects of market volatilities on NSK and Sumitomo Chemical and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NSK with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of NSK and Sumitomo Chemical.
Diversification Opportunities for NSK and Sumitomo Chemical
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NSK and Sumitomo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NSK Ltd ADR and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and NSK is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NSK Ltd ADR are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of NSK i.e., NSK and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between NSK and Sumitomo Chemical
Assuming the 90 days horizon NSK Ltd ADR is expected to under-perform the Sumitomo Chemical. In addition to that, NSK is 1.49 times more volatile than Sumitomo Chemical Co. It trades about -0.14 of its total potential returns per unit of risk. Sumitomo Chemical Co is currently generating about 0.11 per unit of volatility. If you would invest 1,098 in Sumitomo Chemical Co on November 28, 2024 and sell it today you would earn a total of 52.00 from holding Sumitomo Chemical Co or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NSK Ltd ADR vs. Sumitomo Chemical Co
Performance |
| Timeline |
| NSK Ltd ADR |
| Sumitomo Chemical |
NSK and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NSK and Sumitomo Chemical
The main advantage of trading using opposite NSK and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NSK position performs unexpectedly, Sumitomo Chemical can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.The idea behind NSK Ltd ADR and Sumitomo Chemical Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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